5 Reasons Why Small Businesses have a Hard Time with AdWords

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Let’s assume that you’ve been running a good old family local business selling western clothing online. Throughout the years, business has been good to average depending on the season, and you’ve been using regular advertising media, radio, banner ads, newspapers etc.

Then, all the sudden you start to notice that your sales have been steadily dropping during the last couple of years compared to previous sale cycles.

After asking some of your friends and family, you realized that there’s a “new” online advertising tool Called Google AdWords, so you decide to jump on the bandwagon and create your first AdWords campaign to advertise your business online.

After the first month of using AdWords, you are disappointed because you don’t see an increase in your sales, so you decide to quit. Other SMB’s make the same decision to integrate AdWords to their Marketing efforts and expect an immediate Return on their Investment. Today, we are going to explore the concrete reasons why SMB’s owners struggle to get started with AdWords to help your business avoid the hurdles and have a smooth start in Online Advertising:

1. Being too Conservative: Starting with a Very Small Budget

Since you are new to AdWords, you decide to start with a small budget for your advertising efforts.

This sounds like a conservative but common sense approach, the only problem is that if you don’t take into account data such as the Avg. CPC of your main keywords you could run out of budget too quick during the day and not generate enough traffic to make your campaign work.

Let’s say you assigned a $10 daily budget, but then realize that your Avg. CPC to reach a position among the top 3 is about $1.25.

Now, by using the following simple formula, you can estimate the amount of clicks per day you can get with the set budget:

$10 ÷ $1.25 = 8 Clicks

This means that your budget is too low, as even if 1 out of your 8 potential clicks turns into a sale, that would require a conversion rate of more than 12.50%, which although possible, it is not likely to happen, especially on a new campaign.

Define a Healthy Budget for Your Campaign

A good way to define a healthy budget for your campaign is by taking into account the Avg. CPC for your main keywords, and considering how many clicks the campaign would need to develop enough leads to become profitable.

If it takes you 15 clicks to make one sale and your Avg. CPC is $1.25, that means that the lowest budget you should consider would be approximately $18.75 a day.

15 Clicks x Avg. CPCP $1.25 = $18.75

Using too low of a budget is one of the main problems small businesses tend to run into when running their first AdWords campaigns. I recommend you to use all tools available such as the Keyword Planner to estimate potential avg. CPC and traffic to your campaign before deciding your campaign’s budget.

For more on how to set an AdWords budget read my colleague’s blog post on the subject: How to Find Out How Much It Will Cost You To Start A New AdWords Campaign

2. High Level of Competition

In AdWords, the level of competition is important to define the strategy and the best approach to use while creating and managing a campaign.

Assume for a minute that your campaign is now competing with a couple of big retail chains stores that also sell western style clothing.

This could put you in a tough position as your competitors would have daily budgets much higher that yours. They could also afford higher bids on the main keywords, so this could lower the ad rank of your ads and place you in very low and less visible positions.

Facing high levels of competition from bigger businesses is a very common problem faced by small businesses starting to advertise with AdWords.

In this case, unless you are able to afford a substantial increase in your budget or find longer tail keywords with less competition, your campaign would be like a small fish in a big pond full of hungry sharks.

3. Having Less than Ideal Websites

Many small businesses have less than ideal websites and that affects the performance of their AdWords campaigns.

Going back to the western clothing campaign, if you have a great set up with a great position, avg. CPC and a great CTR but have no conversions, what could be the problem?

In a lot of cases it could be the quality of the website. If the website is not easy to navigate, it’s confusing, or even worst the ordering process is very complicated, that could explain why there are no conversions.

If your keywords and ads are very targeted and after reviewing the search terms you notice the campaign is driving the right traffic, then this would be a clear indication there is something off on your website that needs to be addressed.

A common problem is that the shopping cart, contact us form, or the signing up process are too long or complicated and potential clients get frustrated or bored before completing the task.

This also could explain higher than normal bounce rates on your Google Analytics reports.

To deal with this problem you could redesign your website to improve the user experience once customers land your pages. Improving the overall quality of your website could also help you increase the quality score of your keywords and the relevancy of your ads all of which would help lower your Avg. CPCs as well.

4. No Campaign Tracking Installed

Many small business owners create pretty good campaigns, but often fail to install proper tracking methods.

If you create a great campaign but don’t install any sort of tracking, it would be very difficult to assess how effective the campaign is, and the optimizations would be based on stats such as CTR and Avg. Metrics that don’t guarantee success.

Without call tracking or conversion tracking, you won’t be able to determine which are the better performing keywords for your campaign, which can drive you to make serious mistakes when optimizing.

Let’s say you paused a keyword with a low avg. position and lower CTR as you think it’s underperforming. Without any tracking active, this could be a risky decision, as you have no idea whether that particular keyword has generated any calls or conversions for your campaign.

Google provides you with very powerful tracking tools such as analytics, forwarding call tracking numbers, and conversion tracking.

Transparency and accountability are two of the main principles for Google, thus it is to your best advantage to make sure to install the proper tracking methods on your campaign.

5. Research, Research, Research

Being a small business and competing in the AdWords arena is not necessarily an easy task to accomplish. Just remember to perform an in-depth competitive research to identify who are your main competitors in your industry.

Also make sure to perform a thorough keyword research in order to identify keywords with less competition and therefore lower avg. CPCs. This will help you to become more competitive compared to bigger businesses using much larger budgets that yours.

There are many factors to take into consideration, but if you set up a good campaign strategy and manage to avoid falling into the pitfalls mentioned in this article you should be able to run an effective campaign for your small business.

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